A fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000 Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000

A fire destroyed the warehouse of Reed Enterprises, on August 31, 20Y1. The books and records of Reed showed the following information on that date. Merchandise Inventory. Jan. 1, 20Y1 $600,000 Purchases to date 990,000 Freight - In 30,000 Sales to date $2,400,000The gross profit ratio has averaged 60 % of sales for the past six years. Required: Use the gross profit method to estimate the cost of inventory destroyed by fire. Group of answer choices $660,000 $1,590,000 $1,620,000 $960,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 30 September 20X1 part of the inventory of a company was completely destroyed by fire. The following information is available: Inventory at 1 September 20X1 at cost $49,800 Purchases for September 20X1 $88,600 Sales for September 20X1 $130,000 Inventory at 30 September 20X1 – undamaged items $32,000 Standard gross profit percentage on sales 30% Based on this information, what is the cost of the inventory destroyed?
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